Memorandum from the Quarry Products Association
The Quarry Production Association represents
the aggregates industry, including the quarrying and dredging
of primary aggregates, the processing and marketing of recycled
materials and secondary aggregates, the production of asphalt,
lime, mortar and ready-mixed concrete, and asphalt contracting.
The QPA also represents companies producing plant and equipment
and providing a range of services to the sector. QPA members produce
90 per cent of aggregates supply, and a higher proportion of the
value added products supplied by the sector. Forty per cent of
aggregates are used in public sector projects.
We welcome the opportunity to provide further
evidence to the committee relating to Government's consideration
of potential aggregates taxation and the QPA New Deal proposals.
In the July 1997 Budget a supplementary Treasury
paper announced that research would be commissioned into the environmental
costs associated with quarrying, with the results to "inform
consideration of whether there is a case for further measures
which could include tax measures . . ."
In May 1998, Planning Minister Richard Caborn
confirmed that Government would consider an alternative approach
to aggregates taxation: "we remain open to suggestions which
could be demonstrated to significantly mitigate the environmental
impacts (of quarrying). This might mean additional regulation
through the planning system, action by the industry, or a combination
The November 1998 Pre-Budget Report confirmed
this process, "the extraction of aggregates, such as gravel,
can have a damaging impact on the environment. The Government
will consider the case for an aggregates tax, in the light of
the responses to the recent consultation and proposals made by
the industry to reduce the environmental impact of aggregates
"Such proposals would have to amount to
a deliverable package of measures which would permanently secure
equivalent or greater benefits than a tax".
The 1999 Budget stated: "Results from the
second round of research into the environmental costs of aggregates
extraction shows that there are significant environmental costs
associated with the extraction of aggregates. The Government believes
there is a case, in principle, for an aggregates tax . . . However,
before coming to a final decision on whether to proceed with a
tax, the Government would like to pursue further the possibility
of a package of voluntary environmental improvements by the quarrying
industry. Should the industry not be able to commit to an acceptable
improved offer, or fail to deliver an acceptable package of voluntary
measures, the Government would then introduce a tax".
The QPA has consistently held the view that
taxation would be an ineffective means of minimising the environmental
impacts of the quarrying industry and the key policy aim should
be to seek the most effective means of reducing impacts on local
communities and encouraging improving environmental practice in
the supply of aggregates.
In November 1998, a framework package of voluntary/regulatory
proposals as an alternative to aggregates taxation was submitted
In July 1999, following the Government's statement
in the March 1999 Budget, the QPA submitted an improved and more
comprehensive New Deal package to Government. Copies of that submission
were circulated to members of the Committee, but not in time for
consideration in the Committee's inquiry into the 1999 Budget.
The aim of the submission below is not to duplicate
the full QPA New Deal in defining the detail and purpose of each
of the individual QPA proposals. It is, rather, to highlight the
major issues and potential contributions the QPA New Deal (or
aggregates taxation) can make to the achievement of Government's
policy aims. The submission complements the New Deal and refers
specifically to issues raised in the Pre-Budget Report.
General Purpose of Taxation
Environmental taxation has two theoretical purposeseither
to alter behaviour of a market to a more sustainable end, or to
raise revenue (or perhaps a combination of both).
The consideration of aggregates taxation has
been confirmed consistently by Government as an environmental
issue, notably with regard to seeking real improvements in the
quality of life of local communities in quarrying locations. Equally,
the comparison between potential aggregates tax and the QPA proposals
is an environmental one, not a decision to be based upon revenue-raising
potential. This was expressed with particular clarity in the 1998
Pre-Budget Report, which stated, "Such proposals (ie those
of the QPA) would have to amount to a deliverable package of measures
which would permanently secure equivalent or greater benefits
than a tax."
The QPA New Deal has been developed expressly
to deal with the environmental impacts of quarrying such as those
identified in the 1998 and 1999 Pre-Budget Reports and in the
externality research by London Economics (Note 1) in a more effective
manner than taxation.
THE QPA NEW
The QPA proposals have been designed specifically
to generate real and continuing environmental improvements in
the operations of the quarrying industry. The proposals encompass
a range of measures to generate environmental improvement, for
through commitments to implement
environmental management systems and transport codes early and
through commitments to optimise the
level of recycling through significantly higher levels of investment
to enhance recycling capacity;
through the establishment of a sustainability
fund to finance environmental improvements for local communities
affected by aggregates production;
through engaging Government in a
partnership to support quarry operations with good environmental
practice through public purchasing policy.
The potential aggregates tax, on the other hand,
is essentially a straightforward production tax, which is not
designed to achieve specific environmental objectives, nor to
distinguish between different levels of environmental performance.
In order to assess the environmental merits
of the QPA proposals and the potential tax, the QPA commissioned
Professor David Pearce to examine the consequences of elements
of the QPA New Deal relating to training and environmental management,
and aggregates taxation. The report by Professor Pearce has been
circulated in full to Committee members, to Government, and to
a wide range of stakeholders in this issue. The report ("The
Economic Benefits of Environmental Training and Awareness Programme
in the Aggregates Industry" by Economics in the Environment
ConsultancyEFTECJuly 1999) concludes that:
There are powerful reasons for supposing that
an aggregates tax is an inefficient solution to the aggregates
externality issue. Thus we conclude that there is evidence to
suggest that a well designed voluntary agreement will achieve
as much or more environmental benefits as an aggregates tax.
The work by Professor Pearce and EFTEC did not
assess the environmental impact of other elements of the QPA package
such as the voluntary sustainability fund, recycling initiatives,
or green purchasing initiatives. We would envisage therefore that
the implementation of the complete QPA package would generate
more environmental benefits than the initiatives specifically
assessed by Professor Pearce and EFTEC.
We believe the work of Professor Pearce and
his colleagues at EFTEC is the most significant independent contribution
to the aggregates tax debate since the issue was first raised
by Government. Due to the July availability of this work, the
Committee did not have the opportunity to consider this assessment
in its inquiry into the 1999 Budget.
The work of Professor Pearce/EFTEC is particularly
important because there has been no other detailed consideration
of the environmental efficiency of the QPA New Deal/potential
aggregates tax published. In spite of starting formal consideration
of aggregates taxation in July 1997, Government has published
no consultation or discussion papers identifying the potential
aims of aggregates taxation, nor the means by which these aims
may or may not be achieved. The QPA has developed its New Deal
package on the assumption that the mitigation of environmental
impacts set out in successive Budgets, Pre-Budget reports, and
a number of Government statements is the key issue. (The Committee
may not be surprised, however, that a number of people and organisations
with whom we have discussed our proposals have viewed the tax
proposals as more driven by revenue than environmental considerations).
Over the past decade there has been a significant
increase in the use of recycled/secondary aggregates, as set out
*Data on the use of recycled/secondary materials is not precise.
The figures above represent our best judgement based upon Government,
aggregates industry, and other research sources.
Survey work carried out by the Building Research Establishment
suggests that the re-use/recycling of demolition and construction
materials in aggregates markets amounts to 41 million tonnes pa.
The use of recycled/secondary materials in aggregates markets
has increased for a number of reasons, including:
The increasing cost and scarcity of landfill space.
The increasing involvement and investment by aggregates
companies in recycling markets, bringing greater technical, commercial
and financial resources into the sector.
The development of specifications to better accommodate
the use of recycled/secondary materials.
The QPA New Deal proposals build upon these developments
The QPA proposal to guarantee investment in enhancing
recycling capacity of £25 million pa for five years (we estimate
current QPA investment in recycling at £3-£5 million
The QPA bid to fund the Aggregates Advisory Service
and jointly manage the AAS (with the Building Research Establishment).
The development of rigorous sustainability indicators,
including indicators in respect of the use of recycled/secondary
The development of a green purchasing initiative
in the sector including recycling criteria.
The continuing promotion of the use of recycled/secondary
materials, such as the current discussions between the QPA and
the Highways Agency to develop specifications for the use of recycled/secondary
It has been suggested that aggregates taxation is necessary
to ensure the full use of recycled/secondary materials, and therefore
that recycling becomes a justification for taxation. In our view
this justification is not valid because:
The use of recycled and construction materials
in construction markets is increasing already without an aggregates
tax. (see Table 1)
An effective environmental instrumentlandfill
taxalready exists in the sector. A primary purpose of landfill
tax is to encourage recycling, and now that the landfill tax is
established and increasing it is not clear what additional stimulus
an additional tax instrument would provide. No quantified analysis
has been published through Government sources to identify the
specific potential impact on recycling markets of aggregates taxation.
In contrast, the results of research commissioned by the European
Commission has concluded that aggregates taxation would be unlikely
to generate significantly greater use of recycled material (see
The QPA New Deal includes a guarantee of very
substantial increases in recycling investment and other measures
to promote the use of recycled/secondary materials in aggregates
Current targets for the use of recycled/secondary
materials in aggregates markets by 2001 have already been met.
(Mineral Planning Guidance Note No 6 set a target for 2001 of
40 million tonnesour estimate of the use of these materials
in 1998 was 44 million tonnes).
The Pre-Budget Report states that "the extraction and
transport of aggregates generates adverse environmental effects
including noise, dust, visual intrusion, loss of amenity and adverse
effects on nature" (Para 6.14). The summary set out in Table
6.1 "The environmental impact of tax measures" defines
the environmental impact and policy objectives of "aggregates
tax or alternative package of voluntary measures" as follows;
Possible reductions in noise, dust, visual intrusion, damage
to wildlife habitats and other environmental impacts.
Internalise environmental costs of aggregates extraction.
Encourage use of recycled aggregates.
As set out earlier, the aim of the QPA New Deal is to minimise
the adverse impacts set out in paragraph 6.14 and table 6.1 (and
therefore the externalities associated with quarrying), to encourage
recycling, and in addition to support a range of environmental
initiatives through the proposed £20 million pa. Sustainability
Fund. Table 6.1 of the Pre-Budget Report quotes "possible"
reductions in environmental impacts as a consequence of the potential
environmental measures, although no mechanism has yet been proposed
by which this could be delivered. On the other hand the QPA package
would deliver real and significant benefits, through targeting
precisely those impacts identified in successive Budgets and Pre-Budget
This reference to the environmental impacts of policy measures
being only "possible reductions in noise, dust, etc. . .
" appears an extremely modest policy expectation. It does
not match the criteria for good taxation associated with the Government's
statement of intent on Environmental Taxation set out in paragraph
6.23 of the Pre-Budget Report: "Economic instruments must
deliver real environmental gains cost effectively".
This modest expectation for "possible reductions"
in the impacts of aggregates extraction contrasts with the much
more significant expectations for environmental improvements listed
for the other 13 announced tax measures or measures under consideration
in table 6.1.
This strongly suggests confusion and lack of clarity at the
heart of Government's aggregates tax consideration. On the one
hand, we are told that the policy aim is to minimise the adverse
environmental impacts of quarrying, on the other hand that the
policy aim is to internalise external costsbased upon the
research results commissioned by Government from London Economics.
The particular difficulty is that these are not mutually compatible
aims. Levels of tax which might match the apparent environmental
costs identified by the research would not have any significant
environmental impact, as the research by Professor David Pearce
Even if one takes the calculated externalities as reasonable
assessments, the next policy step should be to assess how best
to reduce those externalities, not just to assert that tax to
match externalities is a policy aim in itself. While such an approach
may produce a neat theoretical economic equilibrium (costs=taxation),
it does not deal with the real issuehow best to reduce
and permanently minimise adverse externalities.
The QPA believes our proposed New Deal package represents
a far more effective means of reducing environmental impacts than
the proposed aggregates taxation. The New Deal proposals would
generate a faster and more comprehensive rate of improvement than
would be possible if the tax was introduced.
We believe that the proposals submitted to Government in
July 1999 represent a major commitment by the aggregates industry
and we acknowledge that this commitment would probably not have
been made so completely without the threat of taxation.
The QPA proposals will generate a site-specific response
to environmental impacts and therefore will be of direct benefit
to local communities.
The QPA proposals will recognise different levels of environmental
performance and be able to reflect this in the delivery of our
commitments. Tax, on the other hand, would not distinguish between
those operators with good and poor environmental performanceall
would pay the same.
The QPA proposals will help to ensure the prudent use of
natural resources through the promotion of best environmental
practice and recycling initiatives, and also that the extraction
and supply of aggregates resources is carried out to continuously
improving environmental standards.
The QPA proposals would involve a positive partnership between
the quarrying industry, Government, and other stakeholders. It
is particularly important that Government supports the commitment
to higher environmental standards through the influence of public
purchasing policy and, by such leadership, private purchasing
Tax would have little impact on environmental performance
or standards. The low price elasticity of demand for aggregates
would mean that, in general, the overall level of demand for aggregates
would not be significantly affected by tax.
The tax charge would be passed on to the construction industry
and construction clients, increasing the cost of construction.
Public sector projects would be significantly affected as these
account for 40 per cent of aggregates supply.
Existing initiatives, supported by the substantial investment
and promotional measures included in the New Deal, will ensure
further increases in the use of recycled and secondary materials
in aggregates markets.
The quarrying industry supports 40,000 jobs, mainly in rural
and semi rural areas. The introduction and inevitable escalation
of taxation over time would threaten the viability of some operations
and associated employment. The New Deal, however, would ensure
that environmental improvements are implemented throughout the
industry in the most cost-effective manner.
The implementation of the New Deal would ensure that the
UK quarrying industry is the world leader in environmental performance.
The Environmental Costs and Benefits of the Supply of Aggregatesresearch
by London Economics
London Economics was commissioned in September 1997 to research
the "Environmental Costs and Benefits of the Supply of Aggregates".
Following publication of the report in April 1998, concerns expressed
by QPA and others prompted the DETR to commission a peer review
of the report by Professors Susan Mourato and David Pearce of
CSERGE, University College, London. The peer review concluded
"we reluctantly conclude that mainly because of problems
with the design of the questionnaire, the CV estimates cannot
be considered sufficiently robust to inform decisions about a
possible aggregates tax. Potential errors are of unknown magnitude
and we are not able to say if they are under or over estimates".
The peer review made a number of recommendations as to how the
work might be improved, and London Economics were then commissioned
to carry out a further research project. This resulted in a further
report published in May 1999. The report included a range of monetary
valuations for various sources of aggregates supply. The QPA continues
to have serious doubts about the derivation of these valuations,
but rather than becoming embroiled in a debate about specific
valuations, we have used the externalitiesor environmental
impactsidentified in the LE research to focus the QPA New
Deal on the reduction of the key environmental impacts.
Report to DGX1 European Commission "Construction and Demolition
Waste Management Practices, and Their Economic Impacts."
February 1999 Report by Symonds, in association with ARGUS, COWL,
and PRC Bouwcentrum
"8.8 However, we believe that widespread and consistently
high levels of recycling (by which we mean 75 per cent or above
of "core" C&DW being recycled in most regions) is
likely to be achieved only if some form of ban on landfilling
C&DW is imposed and enforced, or if a requirement is put in
place that all C&DW must be separated with each stream being
directed to some form of re-use or recovery operation. Doing this
would effectively remove the second condition from the list in
paragraph 8.7 above.
8.9 By contrast, we believe that relying on a mechanism
such as a tax on landfill or a tax on primary aggregates would
not on its own achieve high recycling rates under all circumstances,
because the tax would have to be set at politically unacceptable
levels before it changed the behaviour of engineers and demolition
contractors in areas with easy access to landfills (or quarries).
Varying the tax rate to match local conditions would create considerable
distortions to trade, and would therefore probably be equally